Privatization of Hydro One shields millions in green-energy spending from public scrutiny

The privatization of Ontario’s largest power utility has left the province with a major blind spot: The public is no longer able to scrutinize millions of dollars consumers are paying for green energy.

It’s a situation that shows “nobody is minding the store” when it comes to keeping track of much of Ontario’s solar energy production, one expert says.

At the heart of the issue is a simple question: Are energy producers who are paid to feed the Ontario grid with solar power being given an opportunity to milk the system?

The province says that’s not the case, but critics are questioning what they see as a lack of the oversight.

Here’s how it works. Businesses and residences that generate their own solar electricity and feed it into Ontario's power grid are under contract to generate a specific amount of energy.

New technology is capable of allowing some to more easily ramp up their production and to increase their output by as much as 40 per cent. Currently producers are being paid between 20 and just over 80 cents per kilowatt hour, depending on when they signed their contracts with the province.

Oversight is needed to make sure these FIT (Feed-In Tariff) and MicroFit producers, as they are called, are not feeding the grid excess power.

Costs for such excess power are invariably passed on, in some form, to consumers.

Ontario’s power system is governed by a web of bodies, including the Crown corporation Independent Electricity System Operator (IESO), the provincially appointed Ontario Energy Board (OEB) and local distribution companies. The largest of the distribution companies is Hydro One, which manages 39 per cent of the FIT and MicroFIT contracts on behalf of the province.

Tara Brautigam, a spokesman with the Ontario Energy Board, says the OEB is not responsible for regular monitoring of those contracts.

"The IESO administers or operates the wholesale electricity market, not the OEB. Similarly, the IESO enters into and administers FIT contracts," said Brautigam.

The IESO, meanwhile, said that while, yes, it is responsible for the province's electricity market, it does not track the amount of money paid to individual green power generators on a regular basis to ensure those businesses are not overproducing.

According to its website, the IESO says it monitors all energy input in the province every five minutes. However, when asked about FIT contracts specifically, it backed away from that statement.

"Each project is individually metered and settled by the (local distribution company)," said John Cannella, a spokesman for the IESO. "Hydro One is responsible for metering and settling FIT contracts in their service territory, as other (local distribution companies) are responsible for the ones in their respective service territories."

However, when the Liberal government initiated the sale of 51 per cent of Hydro One in 2015, the utility changed from being a transparent Crown corporation to a publicly traded, for-profit business.

And that appears to have been a game-changer.

As part of that transformation, Hydro One says it is no longer required to comply with freedom of information laws. As a result, how Hydro One is managing those green energy contracts is subjected to very little public scrutiny.

The utility is also no longer responsible for providing information to the province's auditor general. A spokeswoman for the auditor general's office pointed to the office's 2015 report in which the auditor general, Bonnie Lysyk, highlighted that the sale of Hydro One to private interests would remove any oversight into the utility's operations.

Already the utility's executives have disappeared from the province's public-sector salary disclosure data, more commonly known as the Sunshine List, which details provincial employees who earn more than $100,000 annually.

Hydro One confirmed that while it does monitor the energy production and pay thousands of FIT and MicroFit producers across the province, it is no longer able to share any information about those contracts publicly.

"We aren’t able to provide the customer information," said Tiziana Baccega Rosa, a spokeswoman for Hydro One while explaining that Hydro One is no longer bound by the province's information sharing laws.

"All local distribution companies ... meter the generators' hourly output and pay them monthly for the exact kWh (kilowatt hours) they produce. The local distribution company then bills the IESO monthly for all of the embedded generation that was paid out that month. This is the process set by the IESO and the local distribution company can be audited at any time."

Baccega Rosa said it is in Hydro One's best interest to monitor the contracts to ensure that producers aren't overproducing energy, as overproduction could damage components of the province's electrical grid.

However, increased energy transportation across the province’s electrical grid would, as a matter of fact, also allow the privately held Hydro One to charge ratepayers more in transmission costs.

The IESO, meanwhile, said it has conducted 400 audits of green energy producers, representing about 10 per cent of all FIT contract holders. None of those was found to be overproducing.

But there is evidence that overproduction of energy is a real issue for Ontario.

A study the Ontario Society of Professional Engineers released last month estimated that in 2016 alone, Ontario lost between $384 million and $675 million on clean energy exports due to an oversupply.

In other words, after paying millions of dollars to generate the power, Ontarians paid millions more to get rid of the green electricity because the province didn’t need it.

The auditor general has also complained about the issue.

Between 2009 and 2014, Ontario exported 95.1 million megawatt hours (MWh) of power to other jurisdictions, including New York and Michigan. The province lost as much as $3.1 billion by exporting that power

"We have confidence in both the Independent System Operator (IESO) and the Ontario Energy Board to ensure that our renewables contracts are being managed appropriately," said Colin Nekolaichuk, a spokesman for Energy Minister Glenn Thibeault.

“The IESO ensures that projects are constructed within the proper parameters, and local utilities ensure that those contracts are operated within the terms of their contract.”

Nekolaichuk confirmed that the rules have changed for Hydro One.

"Publicly traded companies are subject to different requirements from Crown corporations. No publicly traded company in Ontario, including Hydro One, is subject to the Freedom of Information and Protection of Privacy Act," he said. "Hydro One will continue to be governed by Ontario laws, including the Business Corporations Act and the Securities Act and will continue filing information with the Ontario Securities Commission."

Critics slammed the response.

"That's what happens when you break up this system. Now, nobody is minding the store," said Steve Aplin, an energy environment data specialist with website Emmissiontrak. "It's outrageous that the IESO, they send the cheques. You don't just blindly send a cheque off to somebody. There must be some fiduciary responsibility."

Todd Smith, MPP for Prince Edward-Hastings and PC Energy Critic, said the inability to pull back the curtain on Hydro One and request specific records regarding the payments it's been making on behalf of Ontario ratepayers is "alarming."

"If the same kind of thing is occurring for the 27,000 generators as a result of the FIT program and the Green Energy Act, and nobody is actually checking to see if they are billing for ineligible costs or over billing, that’s alarming," he said. "I can’t believe there is no AG (auditor general) oversight, there is nothing FOI-able (Freedom of Information Act) for Hydro One. This is really bad."

Smith's comments were supported by Michael Mantha, NDP MPP for Algoma-Manitoulin, who called the decision to sell off a majority of Hydro One "wrong-headed."

"There is one of the biggest problems that we had with this government taking the route to continuing the wrong-headed decision of privatization," he said. "Big private companies take advantage of opportunities that are there. In order for us to have greater control and greater say, why did we go down the avenue of selling our biggest asset?"